Thank you for your prompt response to our earlier letter. Unfortunately, your response
did not include the accounting that we had requested. We had requested that advocates of
individual accounts produce the same sort of detailed projections for stock returns
(specifically, dividend yields and capital gains) as the Social Security Trustees produce
for wage growth, interest rates, life expectancy and other relevant economic and
demographic variables. The page you referred us to in the Advisory Councils Report
simply states the rate of return that was being assumed in subsequent calculations; it did
not specify how it was broken down into its two components, nor how it might vary over
this time period. This is not the sort of detailed projection that the trustees have
considered necessary to make their projections on other variables that affect the
soundness of program. You can find these projections on pages 57-61 of the 1998 Trustees
Report. We believe that the public has the right to demand exactly the same degree of
specificity on assumptions about stock returns, or any other factor that affects the
soundness of the program.

You have correctly pointed out that the accuracy assumptions on stock returns also
arises for those such as Robert Ball who have advocated investing the trust fund in the
stock market. But, as you note, the fund is still liable for making full benefit payments
under these proposals. This means that with a Ball type plan for collective investment,
the government will be obligated to make up lost revenue if the market performs below
expectations, but the retiree is not harmed. With a system of individual accounts, under
such circumstances, the retiree will have lost much of their projected benefit, even
though, as you point out, the government will be off the hook.

A paper authored by Dean Baker ("Saving Social Security in Three Steps,"
Economic Policy Institute, 1998), finds that under the plan you support and with realistic
calculations of stock market returns, an average wage earner, retiring at age 65 in 2030,
will lose 28.4 percent of his or her currently scheduled benefits (including the value of
the annuity from the individual account). A low wage earner retiring at age 65 in 2030
will lose 23.8 percent of the benefits currently projected. The point of Social Security
is to remove risk from the individual, implicitly transferring it to the government. It
would not seem like an argument in support of a reform plan that it has accomplished the
opposite.

The question of where we believe the risk should lie is of course a political one, and
reasonable people can come to different conclusions. However, we do believe it is a matter
of basic honesty that all the relevant variables be subject to the same standard of
scrutiny. For this reason, we again request that a year by year breakdown of the two
components of stock returns (capital gains and dividends) be produced, so that the public
has a basis to assess their plausibility.

Thank you again for your prompt reply to our first letter. We look forward to your
accounting of stock returns.